Canada’s MLS Home Sales fell 12.6% in April

When the Canadian Real Estate Association released its numbers yesterday, the sound you heard was the steam whooshing out of our housing market.

Home sales fell 12.6% across Canada from March to April and benchmark prices fell 0.6% in what one economist called a remarkable turn of events. The demand fever in Canadian housing broke and, who would have thought, all it took was a nudge in interest rates by the Bank of Canada to change sentiment, said Robert Kavcic, senior economist at the BMO.

The numbers were a far cry from the record-breaking upward flight of property values seen in the fall and winter.

Kavcic said the 0.6% drop in the national MLS Home Price Index in April was among the weakest in the past decade, and was the first drop since April 2020.

He said that the price of homes in the first quarter of 2022 is going to be below the purchase price for a long time, but prices are still up 23.8% from the year before.

We had the data on Canada's major markets last week but this week we got the big picture.

The biggest price gains during the peak days of the pandemic are now seeing the biggest declines, many of them in South-western Ontario.

RBC economist Robert Hogue said that the MLS Home Price Index fell by 4% in London from the month before, in Cambridge by 3.9%, in Niagara region, - 1.9%, Kingston, - 1.8%, Barrie, - 1.5%, Kitchener-Waterloo, - 1.1% and Hamilton, - 1.1%.

Markets such as Chilliwack, - 1.7%, and Fraser Valley, - 0.1%, also saw declines.

Vancouver's price index went up by 0.3%, but it was the smallest rise in almost two years, said Hogue.

Prices continue to climb in the more affordable Atlantic Canada and the Prairies. The home price index was up 5.6% in Halifax-Dartmouth from the month before, Saint John was up 3.2%, Fredericton, 2.7%, and Moncton was 2.4%. In Edmonton, prices rose moderately, up 1.4%, Regina, 1.2%, Calgary, 0.8%, and Saskatoon, 0.6%. Winnipeg and Winnipeg were 0.4%.

Hogue said that most of Quebec posted modest price gains.

The Bank of Canada rate hiking cycle has proved to be a gamechanger, turning what has been a tremendous tailwind into a stiff headwind for the market, and RBC economists think April was the market peak.

The sizable drop in activity in April marks a turning point for the Canadian market with further cooling on the way, said Hogue.

The economists view this as a welcome correction after the unsustainable frenzy of the past two years.

We expect the price correction seen in Ontario and parts of British Columbia to deepen and spread to other markets as market sentiment sours, but it is unlikely to morph into a meltdown. Hogue said that positive demographic factors will provide a safety net against a hard landing.

There are signs that markets are returning to normal. In April, the sales-to-new listings ratio reached balanced-market territory in Toronto, Hamilton, Niagara region, Kitchener-Waterloo and Windsor, RBC notes.